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03-02 : Wire Transfers

Requirements and Fraud Prevention

For situations where it is more appropriate to use a wire transfer to send trust funds, Law Society Rule 5-43(1)(b) requires approval from the Chief Executive Officer to disburse funds without use of a cheque. Such approval may be obtained in one of two ways:

  • Firms that only occasionally need to wire funds must pre-submit an approval form – which is based on the requirements in this practice direction – through the Member Portal on the Society’s website; or
  • Blanket approvals of firm procedures may be requested from the Audit Department if use of a wire transfer on a fairly regular basis is expected. Firms with blanket approval need not submit an approval form or otherwise contact the Society prior to proceeding with individual wire transfers thereafter, although the firm must review and renew their procedures when submitting each Annual Trust Account Report.

The below requirements are designed to address the heightened risk surrounding wire transfers in recent years through various forms of fraud. In addition, all staff involved in the transaction should apply cautious diligence and a high level of scrutiny to each and every wire transfer, being wary of unusual circumstances or situations that cause a sense of discomfort – a ‘red flag’. Such circumstances or situations need to be investigated and resolved before proceeding with a wire transfer.

In addition to the approval process noted above, Law Society requirements regarding wire transfers are as follows:

  1. Confirmed Available Funds

    As with any disbursement from trust, funds to be wired must first be confirmed to be available. This involves:

    • verifying that funds are available in the client trust ledger;
    • ensuring the receipt has been deposited to the pooled trust bank account; and
    • confirming that it has cleared through the banking system.

     

  2. Receipt of Instructions

    Instructions received by the firm to initiate the wire transfer must be received in writing, including:

    • Authorization: The client must authorize the use of a wire transfer;
    • Account details: Recipient information and bank account details;
    • Verbally confirmed written instructions: If written instructions are being provided in any way other than delivery in person by the recipient whose identity you have verified (refer to Rules 5-116 to 5-130), the information must be confirmed verbally in person or by phone using pre-existing contact information for the recipient – not the contact information accompanying the instructions. False contact information included in written instructions is a common fraud technique.

     

  3. Provision of Instructions

    The firm must provide written instructions to its savings institution to complete the wire transfer, including:

    • Authorization: The letter or requisition must authorize the use of a wire transfer by signature of one or more lawyers in the firm with signing authority on the trust account;
    • Account details: Recipient information and bank account details;
    • Method of deliver of instructions: Firms who do not have blanket approval of procedures from the Society for wire transfers must have the lawyer who is authorizing the transaction attend the savings institution to complete the wire transfer. Firms with blanket approval that use any delivery method of written instructions other than in person by the authorizing lawyer must have a process set up with their savings institution that requires verbal confirmation of authorizing lawyer instructions using pre-existing contact information. Contact information accompanying the instructions is not to be used.

     

  4. Update of Accounting Records

    All wire transfers must be recorded in the accounting records at the time the transaction takes place, using the instructions in 3. above as a source document.

     

  5. Confirmation

    Similar to the return of a cleared cheque, the savings institution must provide some form of confirmation that the wire transfer has been carried out as authorized. Such confirmation should be compared with the originating instructions forthwith and any anomalies investigated and resolved immediately.

     

  6. Documentation

    All documentation related to the wire transfer – client authorization and instructions, instructions to the savings institution and confirmation received thereafter – are to be stored with the accounting records as well on the related client file.

     

(May 15, 2003)
(Amended November 23, 2017)

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